May 26, 2024

The Defend Trade Secrets Act and Whistleblowers

As Freedom to Tinker readers know, I’ve been an active opponent of the federal Defend Trade Secrets Act (DTSA). Though my position on the DTSA remains unchanged, I was both surprised and pleased to see that the revised Defend Trade Secrets Act now includes a narrow, but potentially useful, provision intended to protect whistleblowers from trade secret misappropriation actions.

As attendees at yesterday’s wonderful CITP talk by Bart Gellman were fortunate to hear, whistleblowing remains a critical but imperfect tool of public access to the internal operations of our institutions, from corporations to government. Trade secrecy operates in the opposite direction, and has the robust ability to thwart regulation, limit public accountability, and criminalize whistleblowing. I’ve regularly called trade secrecy the most powerful intellectual property law (IP) tool of information control, as it prevents not just use of, but access to and even knowledge about the very existence of information. Indeed, it surpasses other IP law in that power by a wide margin. Thus, if the DTSA is moving forward, the inclusion of even a limited whistleblower exception in the DTSA is a good thing.

Nonetheless, it is very important to recognize what this provision won’t achieve. As written, the provision prevents liability under federal and state trade secret law for “the disclosure of a trade secret that … is made … in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and … solely for the purpose of reporting or investigating a suspected violation of law; or … is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Thus, as written, the provision does not appear to immunize sharing trade secret information with the press or the public at large. As Gellman’s work has shown, the press is often the first and only avenue for access to critical information about our public and private black boxes.

In fact, for the provision to have any power, one has to believe that administrative entities both want access to, and will act upon, trade secret information that reveals problematic behaviors by regulated industries. That assumption is not always clear. [Disclosure: I was a member of the North Carolina Mining and Energy Commission’s Trade Secret Study Group that advised on the linked North Carolina hydraulic fracturing regulations. Needless to say, I was not pleased that the revelation of hydraulic fracturing trade secrets was criminalized, and advocated against such a result]. Thus, public (or at least greater) access to trade secret information is often needed, if public accountability and policy course-correction are the goals. This provision does not do much to achieve that end.

Additionally, the provision does not apparently immunize sharing information for purposes of pointing out where the law might be wrong, misguided or unjust. If the importance of that issue is not readily apparent, please see the Panama Papers leak — which includes many trade secrets — and the fact that, as The Atlantic pointed out, “the real scandal is what’s legal.”  I’ll have more to say about these broad issues in upcoming scholarship, but for now, the critical point is to recognize that the DTSA’s whistleblower provision is quite narrow.

While there are other issues with the provision that will likely lead to litigation, two other big points are worth making. First, the provision only focuses on trade secrets, and not the broader categories of “confidential information,” “proprietary information,” and “business information.” I’ve written (with a longer exploration to follow in the fall) that this “confidentiality creep” is increasingly moving much public and private activity out of the ambit of public and regulatory oversight and input. I do not expect the DTSA to address these issues, but I also fear that the DTSA will be used to amplify the dubious claims to broad secrecy that often prevent public access in the first place. Put simply, many trade secrets should not be treated as such, especially when they’re neither “trade” related nor “secret.”

Finally, there’s a potentially troublesome “rule of construction” that states that “nothing in this subsection shall be construed to authorize, or limit liability for, an act that is otherwise prohibited by law, such as the unlawful access of material by unauthorized means.” This looks like a carve-out that could swallow the entire rule. Could an employer require an employee to sign an agreement that restricts access to employer information, thereby invoking the rule so as to take action against the putative whistleblower? Would a subsequent or concurrent violation of the federal Computer Fraud and Abuse Act, which is notoriously vague and overbroad, negate the provision? These are open questions.

In sum, the whistleblower provision is a welcome but limited addition to the flawed DTSA. Ideally, Congress would scrap the DTSA and spend more time gathering evidence and data about how trade secrecy is used and can be abused by putative trade secret holders. But as that seems increasingly unlikely, understanding what the DTSA’s whistleblower provision is and isn’t will be important — especially for the would-be whistleblower.